Revealed: Barclays’ last-ditch MFS deals before £1.3bn ‘fraud’ collapse

Tom SaundersSat, June 13, 2026 at 8:03 AM UTC

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Paresh Raja, founder of MFS, has been accused of plundering his business to fund his lavish lifestyle

Barclays is facing questions in the City about what it knew about scandal-hit Market Financial Solutions (MFS) after reducing its exposure in the months running up to its collapse.

MFS paid off millions of pounds owed to Barclays by borrowing from other banks before it plunged into administration, which led to accusations of a £1.3bn fraud by the company.

However, The Telegraph can reveal that Barclays was already in the process of shutting MFS's bank accounts while some of these deals were going on.

Its failure to warn other banks that lent to MFS has angered fellow creditors and raised questions about exactly what it knew about MFS. Its relationship with the company dated back at least 15 years.

One City creditor of MFS said they suspected that Barclays was aware of concerning activity around MFS but chose to protect itself rather than alert other lenders about the concerns.

Typically, banks are limited in what they can disclose about clients because of confidentiality agreements. However, the concerns of some creditors highlight anger across the City that the fraud was not spotted sooner.

The collapse of MFS has triggered a blame game in the City and prompted a renewed focus on possible hidden dangers lurking in the shadow banking system.

There were several deals leading up to its collapse which cut Barclays's exposure.

Barclays provided banking services to MFS and most of its associated lending vehicles. After recognising financial irregularities with the company, it started blocking transactions in November.

However, MFS attempted to refinance £190m of Barclays ' loans with another UK institution, just days before it collapsed, well after Barclays first noticed irregularities at MFS.

The deal to offload £190m of Barclays exposure to MFS was never completed, after other creditors of the shadow bank pushed it into administration in February.

MFS did successfully refinance £134m of Barclays' exposure to Wells Fargo, in a deal that was completed in November after Barclays had already started freezing accounts at the shadow bank.

A source close to that transaction said that Barclays had been warned about concerns at MFS but chose to protect its position first.

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MFS was a shadow bank, which meant it did not accept deposits and instead funded its loans by borrowing from banks and other lenders.

Banks including Barclays, Santander, Wells Fargo and Jefferies all provided funding to MFS.

Barclays said that its total exposure to MFS amounted to around £500m. However, it expects to recover more than 50pc of that, after writing off just £228m of loans tied to the company in its first quarter results.

MFS collapsed into administration in February, prompting allegations that at least £1.3bn has been "misappropriated" from the business.

Paresh Raja, the company's founder, has been accused of "plundering" MFS to fund a lavish lifestyle.

Mr Raja and his wife allegedly received more than £408m from "funds managed by MFS" to "personal bank accounts" in the UK, Monaco, Singapore and the United Arab Emirates.

He is accused of buying "a vast number of cars", including three Aston Martins, two Mercedes, six Ferraris and three Rolls-Royces with the funds in a lawsuit on behalf of some of the shadow bank's creditors.

Mr Raja currently lives in Dubai, is subject to a worldwide travel ban and asset freeze. He strongly denies the allegations and has consistently maintained that there was no fraud or dishonesty.

Barclays was not the only creditor to have its exposure to MFS refinanced in the months leading up to its collapse.

One of MFS's lending vehicles, which BNP Paribas had lent to, sold approximately a third of its loan book, roughly £41m, to the Japanese bank Sumitomo Mitsui Banking Corporation last August.

Jefferies also provided £100m in financing to MFS in November, just before Barclays began blocking transactions at the bank. Jefferies has stated that it expects its maximum exposure to be around $20m (£17m).

Barclays and representatives for Mr Raja declined to comment.

Wells Fargo, Jefferies, SMBC and BNP Paribas also declined to comment.

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Source: “AOL Money”